Public sector accountability and governance, international donor agencies and environmental sustainability: the case of Sri Lanka

In recent years, there has been a significant rise in foreign aid and funding to developing countries to supplement economic growth and industrialisation. However, these countries are experiencing devastating and widespread environmental degradation. Tensions between the borrowing government and donor agencies and its influence on environmental sustainability in international development are very evident and likely to worsen. There have been calls for more research into public sector accountability to address sustainability issues, particularly in the developing country context. Responding to these calls, this research examines the public sector accountability to environmental sustainability in international development projects in Sri Lanka. In particular, this research focuses on the first highway project in Sri Lanka funded by both traditional donors - Asian Development Bank and Japan International Cooperation Agency, and a non-traditional donor - China Export and Import Bank. Sri Lanka is selected because it became a Middle-Income Country in which the foreign aid landscape is changing.

A single case study consisting of semi-structured interviews and documentary analysis was conducted to collect the evidence. A theoretical framework was devised based on accountability models, public sector governance, theories of resource dependence and principal-agent, and extant literature, to address the research questions. The findings show that depending on the type of public sector accountability, responsiveness to environmental sustainability varied. Moreover, there was a difference in the responsiveness to environmental sustainability between the traditional donor funded projects and non-traditional donor funded ones in Sri Lanka. This has significant implications for environmental sustainability in Sri Lanka given the changing landscape of foreign funding and significant infrastructure development. Due to dependence on foreign resources, a power imbalance is created between the donor agencies and recipient governments where the Principal wields significant control over the Agent. The government of Sri Lanka as the Agent is influenced by the donor conditions. As a result, legal accountability, political accountability and professional accountability relationships are shaped by resource dependence. Nevertheless, if the donor conditions stipulate strong environmental sustainability such as in the case of traditional donor conditions, it tends to encourage at least the minimum level of responsiveness to environmental sustainability.

However, referring to non-traditional donors, legal accountability for environmental sustainability is not established. As a result, environmental sustainability is not treated as a priority in Chinese funded projects. Political influence is evident in all public sector accountability relationships due to the blurred boundaries between political and public administration in Sri Lanka. In instances where political interference is low, higher levels of responsiveness to environmental sustainability are observed. Nevertheless, contrary to some of the existing literature on developing countries, social accountability mechanisms and outcomes are heading in the right direction. The present research contributes to literature and theory by examining in-depth the concepts of accountability and public sector governance, providing further context with specific insights into the influence of resource dependence on principal-agent relationships. This thesis contributes to the existing literature by addressing the gaps in public sector accountability and sustainable development literature, particularly from a developing country context.